The JUAwas supposed to have been funded with a policy constant (a componentof premium that is charged on a per-policy basis) and an RMEC; the for-mer was a thinly veiled subsidization scheme. It was not broken out as aseparate charge on policyholder bills; hence many policyholders would notrealize that they were paying it. Since drivers in both the voluntary andresidual market had to pay this charge, bad drivers in the pool were receiv-ing transfers from good drivers. Rates in the pool were artificially low, andnearly half of New Jersey’s drivers ended up in the residual market.In a 1997 New Jersey Senate Commerce Committee hearing, StateSenator Raymond J. Lesniak characterized the JUA as “going on a cashflow basis and not reserving.”77He was referring to the consequences ofthe decision to ignore unfunded liabilities. In 1985, not long after forma-tion of the JUA, the commissioner did not allow an RMEC because theJUA was generating a positive cash flow. In discussing the incident, theInsurance Information Institute noted that the JUA began running uphuge deficits from its inception, and after the commissioner’s decision,they continued to increase in size.